10-Q 1 sf15701q.txt WORLD MONITOR TRUST--SERIES A -- FORM 10-Q -- SEPTEMBER 27, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 2002 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number: 0-25785 WORLD MONITOR TRUST--SERIES A -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 13-3985040 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One New York Plaza, 13th Floor, New York, New York 10292 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 778-7866 N/A -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check CK whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _CK_ No __ Indicate by check CK whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes __ No _CK_ PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) STATEMENTS OF FINANCIAL CONDITION (Unaudited)
September 27, December 31, 2002 2001 ---------------------------------------------------------------------------------------------------- ASSETS Cash $ 5,673,869 $5,425,959 Net unrealized gain on open futures contracts 717,772 210,147 Accrued interest receivable 9,980 -- ------------- ------------ Total assets $ 6,401,621 $5,636,106 ------------- ------------ ------------- ------------ LIABILITIES AND TRUST CAPITAL Liabilities Incentive fee payable $ 153,424 $ -- Commissions payable 34,694 34,930 Management fees payable 9,655 919 Redemptions payable 5,710 8,618 ------------- ------------ Total liabilities 203,483 44,467 ------------- ------------ Commitments Trust capital Limited interests (53,379.706 and 70,712.634 interests outstanding) 6,135,837 5,531,871 General interests (542 and 764 interests outstanding) 62,301 59,768 ------------- ------------ Total trust capital 6,198,138 5,591,639 ------------- ------------ Total liabilities and trust capital $ 6,401,621 $5,636,106 ------------- ------------ ------------- ------------ Net asset value per limited and general interest ('Interests') $ 114.95 $ 78.23 ------------- ------------ ------------- ------------ ---------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
2 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) Condensed Schedules of Investments (Unaudited)
September 27, 2002 December 31, 2001 -------------------------------- -------------------------------- Net Unrealized Net Unrealized Gain (Loss) Gain (Loss) as a % of Net Unrealized as a % of Net Unrealized Futures Contracts Trust Capital Gain (Loss) Trust Capital Gain (Loss) ------------------------------------------------------------------------------------------------------------- Futures contracts purchased: Stock indices $ -- $ 10,350 Interest rates 229,935 (59,552) Currencies 144,327 100,156 Commodities 137,562 (34,889) -------------- -------------- Net unrealized gain on futures contracts purchased 8.26% 511,824 0.29% 16,065 -------------- -------------- Futures contracts sold: Currencies 101,775 165,632 Commodities 104,173 28,450 -------------- -------------- Net unrealized gain on futures contracts sold 3.32 205,948 3.47 194,082 ------- -------------- ------ -------------- Net unrealized gain on futures contracts 11.58% $717,772 3.76% $210,147 ------- -------------- ------ -------------- ------- -------------- ------ -------------- Settlement Currency--Futures Contracts British pound 0.83% $ 51,476 (1.24)% $(69,132) Australian dollars 0.22 13,723 -- -- Euro 1.17 72,736 (0.46) (25,874) Japanese yen 2.33 144,327 2.17 121,044 U.S. dollar 7.03 435,510 3.29 184,109 ------- -------------- ------ -------------- Total 11.58% $717,772 3.76% $210,147 ------- -------------- ------ -------------- ------- -------------- ------ -------------- ------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
3 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) STATEMENTS OF OPERATIONS (Unaudited)
For the period from For the period from For the period from For the period from January 1, 2002 to January 1, 2001 to June 29, 2002 to June 30, 2001 to September 27, 2002 September 28, 2001 September 27, 2002 September 28, 2001 ------------------------------------------------------------------------------------------------------------------------ REVENUES Net realized gain (loss) on commodity transactions $ 2,109,270 $ 127,759 $ 1,569,725 $(217,272) Change in net unrealized gain on open commodity positions 507,625 383,901 (6,329) 739,704 Interest income 88,764 262,181 34,249 50,439 --------------------- ----------- --------------------- ----------- 2,705,659 773,841 1,597,645 572,871 --------------------- ----------- --------------------- ----------- EXPENSES Incentive fees 153,424 -- 153,424 -- Commissions 309,462 407,958 117,670 107,171 Management fees 79,933 52,561 30,511 13,809 --------------------- ----------- --------------------- ----------- 542,819 460,519 301,605 120,980 --------------------- ----------- --------------------- ----------- Net income $ 2,162,840 $ 313,322 $ 1,296,040 $ 451,891 --------------------- ----------- --------------------- ----------- --------------------- ----------- --------------------- ----------- ALLOCATION OF NET INCOME Limited interests $ 2,139,932 $ 310,552 $ 1,282,075 $ 446,487 --------------------- ----------- --------------------- ----------- --------------------- ----------- --------------------- ----------- General interests $ 22,908 $ 2,770 $ 13,965 $ 5,404 --------------------- ----------- --------------------- ----------- --------------------- ----------- --------------------- ----------- NET INCOME PER WEIGHTED AVERAGE LIMITED AND GENERAL INTEREST Net income per weighted average limited and general interest $ 33.86 $ 3.29 $ 22.46 $ 5.62 --------------------- ----------- --------------------- ----------- --------------------- ----------- --------------------- ----------- Weighted average number of limited and general interests outstanding 63,885 95,272 57,707 80,376 --------------------- ----------- --------------------- ----------- --------------------- ----------- --------------------- ----------- ------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN TRUST CAPITAL (Unaudited)
LIMITED GENERAL INTERESTS INTERESTS INTERESTS TOTAL ------------------------------------------------------------------------------------------------------- Trust capital--December 31, 2001 71,476.634 $ 5,531,871 $ 59,768 $ 5,591,639 Net income 2,139,932 22,908 2,162,840 Redemptions (17,554.928) (1,535,966) (20,375 ) (1,556,341) ----------- ----------- --------- ----------- Trust capital--September 27, 2002 53,921.706 $ 6,135,837 $ 62,301 $ 6,198,138 ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- ------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements.
4 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 27, 2002 (Unaudited) A. General These financial statements have been prepared without audit. In the opinion of Prudential Securities Futures Management Inc. (the 'Managing Owner'), the financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial position of World Monitor Trust--Series A ('Series A') as of September 27, 2002 and December 31, 2001 and the results of its operations for the period from January 1, 2002 to September 27, 2002 ('Year-To-Date 2002'), January 1, 2001 to September 28, 2001 ('Year-To-Date 2001'), June 29, 2002 to September 27, 2002 ('Third Quarter 2002') and June 30, 2001 to September 28, 2001 ('Third Quarter 2001'). However, the operating results for the interim periods may not be indicative of the results expected for a full year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in Series A's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2001. B. Related Parties The Managing Owner of Series A is a wholly-owned subsidiary of Prudential Securities Incorporated ('PSI'), which, in turn, is an indirect wholly-owned subsidiary of Prudential Financial, Inc. The Managing Owner or its affiliates perform services for Series A, which include, but are not limited to: brokerage services; accounting and financial management; registrar, transfer and assignment functions; investor communications, printing and other administrative services. Except for costs related to brokerage services, PSI or its affiliates pay the costs of these services in addition to Series A's routine operational, administrative, legal and auditing costs. Additionally, PSI or its affiliates paid the costs associated with offering Series A's Interests. The costs charged to Series A for brokerage services for Year-To-Date 2002, Year-To-Date 2001, Third Quarter 2002 and Third Quarter 2001 were $309,462, $407,958, $117,670 and $107,171, respectively. Series A's assets are maintained either in trading or cash accounts with PSI, Series A's commodity broker, or, for margin purposes, with the various exchanges on which Series A is permitted to trade. PSI credits Series A monthly with 100% of the interest it earns on the average net assets in Series A's accounts. Series A, acting through its trading advisor, may execute over-the-counter, spot, forward and/or option foreign exchange transactions with PSI. PSI then engages in back-to-back trading with an affiliate, Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on such transactions. PBGM keeps its prices on foreign currency competitive with other interbank currency trading desks. All over-the-counter currency transactions are conducted between PSI and Series A pursuant to a line of credit. PSI may require that collateral be posted against the marked-to-market position of Series A. C. Derivative Instruments and Associated Risks Series A is exposed to various types of risks associated with the derivative instruments and related markets in which it invests. These risks include, but are not limited to, risk of loss from fluctuations in the value of derivative instruments held (market risk) and the inability of counterparties to perform under the terms of Series A's investment activities (credit risk). Market Risk Trading in futures and forward contracts (including foreign exchange) involves entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The gross or face amount of the contracts, which is typically many times that of Series A's net assets being traded, significantly exceeds Series A's future cash requirements since Series A intends to close out its open positions prior to settlement. As a result, Series A is generally subject only to the risk of loss arising from the change in 5 the value of the contracts. As such, Series A considers the 'fair value' of its derivative instruments to be the net unrealized gain or loss on the contracts. The market risk associated with Series A's commitments to purchase commodities is limited to the gross or face amount of the contract held. However, when Series A enters into a contractual commitment to sell commodities, it must make delivery of the underlying commodity at the contract price and then repurchase the contract at prevailing market prices. Since the repurchase price to which a commodity can rise is unlimited, entering into commitments to sell commodities exposes Series A to unlimited risk. Market risk is influenced by a wide variety of factors, including government programs and policies, political and economic events, the level and volatility of interest rates, foreign currency exchange rates, the diversification effects among the derivative instruments Series A holds and the liquidity and inherent volatility of the markets in which Series A trades. Credit Risk When entering into futures or forward contracts, Series A is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded on United States and most foreign futures exchanges is the clearinghouse associated with the particular exchange. In general, clearinghouses are backed by their corporate members who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearinghouse is not backed by the clearing members (i.e., some foreign exchanges), it is normally backed by a consortium of banks or other financial institutions. On the other hand, if Series A enters into forward transactions, the sole counterparty is PSI, Series A's commodity broker. Series A has entered into a master netting agreement with PSI and, as a result, when applicable, presents unrealized gains and losses on open forward positions as a net amount in the statements of financial condition. The amount at risk associated with counterparty non-performance on all of Series A's contracts is the net unrealized gain included in the statements of financial condition; however, counterparty nonperformance on only certain of Series A's contracts may result in greater loss than nonperformance on all of Series A's contracts. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to Series A. The Managing Owner attempts to minimize both credit and market risks by requiring Series A and its trading advisor to abide by various trading limitations and policies. The Managing Owner monitors compliance with these trading limitations and policies, which include, but are not limited to, executing and clearing all trades with creditworthy counterparties; limiting the amount of margin or premium required for any one commodity or all commodities combined; and generally limiting transactions to contracts which are traded in sufficient volume to permit the taking and liquidating of positions. Additionally, pursuant to the advisory agreement among Series A, the Managing Owner and the trading advisor, Series A shall automatically terminate the trading advisor if the net asset value allocated to the trading advisor declines by 33 1/3% from the value at the beginning of any year or since the effective date of the advisory agreement (i.e., March 2000). Furthermore, the Second Amended and Restated Declaration of Trust and Trust Agreement provides that Series A will liquidate its positions, and eventually dissolve, if Series A experiences a decline in net asset value of 50% from the value at the beginning of any year or since the commencement of trading activities. In each case, the decline in net asset value is after giving effect for distributions, contributions and redemptions. The Managing Owner may impose additional restrictions (through modifications of trading limitations and policies) upon the trading activities of the trading advisor as it, in good faith, deems to be in the best interests of Series A. PSI, when acting as Series A's futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by Commodity Futures Trading Commission ('CFTC') regulations to separately account for and segregate as belonging to Series A all assets of Series A relating to domestic futures trading and is not permitted to commingle such assets with other assets of PSI. At September 27, 2002, such segregated assets totalled $2,404,263. Part 30.7 of the CFTC regulations also requires PSI to secure assets of Series A related to foreign futures trading, which totalled $3,987,378 at September 27, 2002. There are no segregation requirements for assets related to forward trading. As of September 27, 2002, Series A's open futures contracts mature within six months. 6 D. Financial Highlights
Year-To-Date Year-To-Date Third Quarter Third Quarter 2002 2001 2002 2001 ------------- ------------- --------------- --------------- Performance per Interest Net asset value, beginning of period $ 78.23 $ 75.76 $ 92.79 $ 72.17 ------------- ------------- --------------- --------------- Net realized gain (loss) and change in net unrealized gain on commodity transactions 44.32 4.60 26.96 6.92 Interest income 1.42 2.64 .60 .63 Expenses (9.02) (4.79) (5.40) (1.51) ------------- ------------- --------------- --------------- Increase for the period 36.72 2.45 22.16 6.04 ------------- ------------- --------------- --------------- Net asset value, end of period $114.95 $ 78.21 $114.95 $ 78.21 ------------- ------------- --------------- --------------- ------------- ------------- --------------- --------------- Total return 46.94% 3.23% 23.88% 8.37% Ratio to average net assets (annualized) Interest income 2.20% 4.89% 2.27% 3.62% Expenses, including incentive fees of 2.85% and 2.54% during Year-To-Date 2002 and Third Quarter 2002, respectively 13.43% 8.59% 19.95% 8.68%
These financial highlights represent the overall results of Series A during Year-To-Date 2002, Year-To-Date 2001, Third Quarter 2002 and Third Quarter 2001. An individual limited owner's actual results may differ depending on the timing of redemptions. 7 WORLD MONITOR TRUST--SERIES A (a Delaware Business Trust) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Series A commenced operations on June 10, 1998 with gross proceeds of $6,039,177 allocated to commodities trading. Interests in Series A continued to be offered weekly until Series A achieved its subscription maximum of $34,000,000 during November 1999. The Managing Owner suspended the offering of Interests in World Monitor Trust--Series B and World Monitor Trust--Series C and allowed all selling registrations to expire by April 30, 2002. As such, Interests owned in one series of World Monitor Trust may no longer be exchanged for Interests of one or more other series of World Monitor Trust. Interests in Series A may be redeemed on a weekly basis. Redemptions of limited interests for Year-To-Date 2002, Third Quarter 2002 and for the period from June 10, 1998 (commencement of operations) to September 27, 2002 were $1,535,966, $878,499 and $23,115,554, respectively. Redemptions of general interests for Year-To-Date 2002, Third Quarter 2002 and for the period from June 10, 1998 (commencement of operations) to September 27, 2002 were $20,375, $10,308 and $217,115. Future redemptions will impact the amount of funds available for investment in commodity contracts in subsequent periods. At September 27, 2002, 100% of Series A's net assets were allocated to commodities trading. A significant portion of the net assets was held in cash, which was used as margin for Series A's trading in commodities. Inasmuch as the sole business of Series A is to trade in commodities, Series A continues to own such liquid assets to be used as margin. PSI credits Series A monthly with 100% of the interest it earns on the average net assets in Series A's accounts. The commodities contracts are subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, commodity exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as 'daily limits.' During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the commodity can neither be taken nor liquidated unless traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent Series A from promptly liquidating its commodity futures positions. Since Series A's business is to trade futures and forward contracts, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contract (credit risk). Series A's exposure to market risk is influenced by a number of factors, including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationship among the contracts held. The inherent uncertainty of Series A's speculative trading, as well as the development of drastic market occurrences, could result in monthly losses considerably beyond Series A's experience to date and could ultimately lead to a loss of all or substantially all of investors' capital. The Managing Owner attempts to minimize these risks by requiring Series A and its trading advisor to abide by various trading limitations and policies, which include limiting margin amounts, trading only in liquid markets and permitting the use of stop loss provisions. See Note C to the financial statements for a further discussion on the credit and market risks associated with Series A's futures and forward contracts. Series A does not have, nor does it expect to have, any capital assets. Results of Operations The net asset value per Interest as of September 27, 2002 was $114.95, an increase of 46.94% from the December 31, 2001 net asset value per Interest of $78.23, and an increase of 23.88% from the June 28, 2002 net asset value per Interest of $92.79. Past performance is not necessarily indicative of future results. Series A's trading gains before commissions were $2,617,000 and $1,563,000 during Year-To-Date 2002 and Third Quarter 2002, compared to $512,000 and $522,000 during Year-To-Date 2001 and Third Quarter 8 2001, respectively. Due to the nature of Series A's trading activities, a period to period comparison of its trading results is not meaningful. However, a detailed discussion of Series A's Third Quarter 2002 trading results is presented below. Quarterly Market Overview Throughout the third quarter of 2002, household wealth continued to decrease as the result of pervasive declines in global equity markets and uncertainty regarding worldwide economies. As a result, U.S. consumer spending, which helped boost U.S. economic growth in the past, was adversely impacted. Additionally, the higher cost of equity capital, heightened degree of risk aversion and uncertainty regarding debt and equity markets further inhibited consumer and business investment worldwide. In the U.S., decreasing wealth stemming from losses on equities were offset, in part, by continuing increases in home equity values. Low mortgage interest rates remained a key factor in sustaining the housing market at a relatively elevated level. Fears of slowing global economies resulted in major declines in long-term interest rates and bond markets surged. Foreign economies followed the lead of the U.S. with persistent weakness evident in European, Asian and Latin American economies, particularly in Japan and Brazil. In the interest rate sector, negative economic news throughout the quarter coupled with significant downturns in world equity markets and disappointing corporate profits caused a flight to quality into bond markets around the world. The U.S. Federal Reserve Bank left interest rates unchanged at 1.75% in its two meetings this quarter, switching its economic outlook for the near future from 'uncertain' to a bias toward 'economic weakness'. The European Central Bank left short-term interest rates unchanged as well. The Japanese bond market was particularly strong as the Japanese economy continued to struggle with recession and investors fled to bonds for safety. The S&P 500 fell 17.63%, the Dow Jones Industrial Average decreased 17.87% and the London FTSE dropped 20.07% for the quarter as investor confidence collapsed in response to continued concerns about accounting transparency, government investigations, heightened tension in the Middle East, and decreased corporate sales and profits. In Japan, the Nikkei Index hit new lows as the economy continued to struggle with structural problems and the Japanese government prepared new fiscal policy initiatives. In foreign exchange markets, the U.S. dollar began the quarter down against many foreign currencies, but reversed its trend towards quarter-end. The euro surpassed parity with the U.S. dollar early in the quarter as investors' desire for U.S. assets decreased, but ended the quarter lower. The British pound rose against the U.S. dollar early in the quarter amid perceived strength in the British economy, while the Japanese yen weakened as worries regarding the Japanese economy persisted. Energy markets continued their upward climb as fears of impending war with Iraq pushed crude oil prices up significantly. Crude oil rose from the low $20's per barrel earlier in the year to approximately $30 a barrel at quarter-end. Gold and other precious metals soared throughout most of the quarter in response to weaknesses in the U.S. dollar and global equity markets and instability in the Middle East. In commodities markets, drought in the Mid-Western United States drove price increases in corn, wheat and soybean markets. Cocoa prices soared as supply deficits and violence in the Ivory Coast pushed the markets to sixteen-year highs. Quarterly Performance of Series A The following is a summary of performance for the major sectors in which Series A traded: Interest rates (+): Interest rate instruments rose throughout the quarter in response to weak economies and poor equity market performance worldwide. Long positions in U.S., European, British and Japanese bonds resulted in gains. Energies (+): Energy prices rallied amid speculation of imminent war with Iraq, low crude oil stock in the U.S. and seasonal demand pressure. Long crude and heating oil positions resulted in gains. Indices (+): Short positions in the S&P 500 and Euro DAX resulted in gains as weak economic data and disappointing earning reports pressed global equity markets downward throughout the quarter. Grains (+): Drought conditions in the Mid-Western United States drove wheat and soybean prices higher resulting in gains for long positions. 9 Currencies (-): The U.S. dollar reversed its downward trend against many foreign currencies toward quarter-end resulting in losses for long Canadian dollar and Swiss franc positions. Metals (-): Short gold and silver positions incurred losses as precious metal prices rose in response to uncertainty in the Middle East and the weak global economy. Series A's average net asset levels decreased during Year-To-Date 2002 as compared to Year-To-Date 2001 primarily from redemptions during Year-To-Date 2002 and the last quarter of 2001 offset, in part, by favorable trading performance during Year-To-Date 2002. Series A's average net asset levels increased during Third Quarter 2002 as compared to Third Quarter 2001 primarily from favorable trading performance during Year-To-Date 2002 offset, in part, by redemptions during Year-To-Date 2002 and the last quarter of 2001. The fluctuations in asset levels have led to proportionate fluctuations in the amount of interest earned by Series A, as well as commissions and management fees incurred. Interest income is earned on the average net assets held at PSI and, therefore, varies monthly according to interest rates, trading performance and redemptions. Interest income decreased $173,000 and $16,100 during Year-To-Date 2002 and Third Quarter 2002 as compared to Year-To-Date 2001 and Third Quarter 2001, respectively due to lower interest rates during 2002. Interest income was also affected by the fluctuations in average net asset levels as discussed above. Commissions are calculated on Series A's net asset value at the end of each week and, therefore, vary according to weekly trading performance and redemptions. Commissions decreased $98,000 during Year-To-Date 2002 as compared to Year-To-Date 2001, but increased $10,000 for Third Quarter 2002 as compared to Third Quarter 2001 due to the fluctuation in average net asset levels as discussed above. Effective December 6, 1999, the Eagle-Global System became the exclusive trading program used by Eagle Trading Systems, Inc. (the 'Trading Advisor') to trade Series A's assets. In conjunction with this change, the Managing Owner and the Trading Advisor voluntarily agreed to terminate the initial advisory agreement ('Initial Advisory Agreement') and enter into a new advisory agreement ('New Advisory Agreement') effective March 21, 2000. Pursuant to the New Advisory Agreement, the Trading Advisor was to be paid a weekly management fee at an annual rate of 1% of Series A's net asset value until the net asset value per Interest was at least $80 for a period of 10 consecutive business days, at which time the weekly management fee was to be increased to an annual rate of 2% (i.e., the rate pursuant to the Initial Advisory Agreement). Effective October 31, 2001, Series A sustained a net asset value per Interest greater than $80 for 10 consecutive business days. As a result, the Trading Advisor has been paid a weekly management fee at an annual rate of 2% since November 1, 2001. The New Advisory Agreement may be terminated for a variety of reasons, including at the discretion of the Managing Owner. All trading decisions for Series A are made by the Trading Advisor. Management fees are calculated on Series A's net asset value at the end of each week and, therefore, are affected by weekly trading performance and redemptions. Management fees increased $27,000 and $17,000 during Year-To-Date 2002 and Third Quarter 2002 as compared to Year-To-Date 2001 and Third Quarter 2001, respectively. This increase was primarily due to the increase in management fee rate from an annual rate of 1% of Series A's net asset value to 2%. Management fees were also affected by the fluctuations in average net asset levels as discussed above. Incentive fees are based on the 'New High Net Trading Profits' generated by the Trading Advisor, as defined in the advisory agreement among Series A, the Managing Owner and the Trading Advisor. Incentive fees were $153,000 for Year-To-Date 2002 and Third Quarter 2002. There were no incentive fees during Year-To-Date 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information regarding quantitative and qualitative disclosures about market risk is not required pursuant to Item 305(e) of Regulation S-K. 10 ITEM 4. CONTROLS AND PROCEDURES Within the 90 days prior to the date of this report, the Managing Owner carried out an evaluation, under the supervision and with the participation of the officers of the Managing Owner, including the Managing Owner's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Series A's disclosure controls and procedures. Based upon that evaluation, the Managing Owner's Chief Executive Officer and Chief Financial Officer concluded that Series A's disclosure controls and procedures are effective. There were no significant changes in Series A's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings--There are no material legal proceedings pending by or against Series A or the Managing Owner. Item 2. Changes in Securities--None Item 3. Defaults Upon Senior Securities--None Item 4. Submission of Matters to a Vote of Security Holders--None Item 5. Other Information--None Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 3.1 and 4.1-- Second Amended and Restated Declaration of Trust and Trust Agreement of World Monitor Trust dated as of March 17, 1998 (incorporated by reference to Exhibits 3.1 and 4.1 to Series A's Registration Statement on Form S-1, File No. 333-43033) 4.2-- Form of Request for Redemption (incorporated by reference to Exhibit 4.2 to Series A's Registration Statement on Form S-1, File No. 333-43033) 4.3-- Form of Exchange Request (incorporated by reference to Exhibit 4.3 to Series A's Registration Statement on Form S-1, File No. 333-43033) 4.4-- Form of Subscription Agreement (incorporated by reference to Exhibit 4.4 to Series A's Registration Statement on Form S-1, File No. 333-43033) 99.1-- Certificate pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the SARBANES-OXLEY Act of 2002 (filed herewith) (b) Reports on Form 8-K--None 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Series A has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WORLD MONITOR TRUST--SERIES A By: Prudential Securities Futures Management Inc. A Delaware corporation, Managing Owner By: /s/ Steven Weinreb Date: November 12, 2002 ---------------------------------------- Steven Weinreb Chief Financial Officer
CERTIFICATIONS I, Eleanor L. Thomas, certify that: 1. I have reviewed this quarterly report on Form 10-Q of World Monitor Trust--Series A ('Series A'); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Series A as of, and for, the periods presented in this quarterly report; 4. Series A's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Series A and we have: a) designed such disclosure controls and procedures to ensure that material information relating to Series A, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of Series A's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the 'Evaluation Date'); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. Series A's other certifying officers and I have disclosed, based on our most recent evaluation, to Series A's auditors and the board of directors of the managing owner of Series A: a) all significant deficiencies in the design or operation of internal controls which could adversely affect Series A's ability to record, process, summarize and report financial data and have identified for Series A's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Series A's internal controls; and 6. Series A's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ Eleanor L. Thomas ------------------------------------- Eleanor L. Thomas President (chief executive officer) of the managing owner of Series A 13 I, Steven Weinreb, certify that: 1. I have reviewed this quarterly report on Form 10-Q of World Monitor Trust--Series A ('Series A'); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Series A as of, and for, the periods presented in this quarterly report; 4. Series A's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for Series A and we have: a) designed such disclosure controls and procedures to ensure that material information relating to Series A, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of Series A's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the 'Evaluation Date'); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. Series A's other certifying officers and I have disclosed, based on our most recent evaluation, to Series A's auditors and the board of directors of the managing owner of Series A: a) all significant deficiencies in the design or operation of internal controls which could adversely affect Series A's ability to record, process, summarize and report financial data and have identified for Series A's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in Series A's internal controls; and 6. Series A's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ Steven Weinreb -------------------------------------- Steven Weinreb Chief Financial Officer of the managing owner of Series A 14